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Two Views On The OIG’s Checkoff Audit

The recent Office of the Inspector General (OIG) report on the national beef checkoff was much anticipated – by everyone on both sides of the program. Essentially, OIG found what everyone already knew – that the program is operating according to both the law and USDA regulations, and there are no compliance issues. Thus, there was no evidence of any misuse of funds, which opponents of the checkoff have been insinuating for years.

I suppose there are two ways to look at the report:

• The industry should be both proud and relieved that there was absolutely no improper use of funds. The processes that had been so painstakingly developed to ensure that dollars are spent wisely and effectively are working.

Not only did the audit validate the processes and the efforts of all of the industry’s leaders who worked so diligently to make the checkoff successful, the report even provided much-needed recommendations to USDA’s Ag Marketing Service to help improve the processes.

• The second way to look at the OIG report is with a real sense of disappointment. How could we have wasted so much time and effort on this issue? How did such a vocal and radical minority create so many problems? This was an indictment of the selection process that failed us miserably and hasn’t been corrected.

Everyone believed that the OIG report would be political and that, by its nature, would have been influenced by the administration and the USDA Secretary, but that doesn’t appear to have happened. I think both sides were shocked that the outcome was so universally favorable.

The checkoff has been a great help in stabilizing beef demand and a tremendous investment for producers, but everyone also knows that we are doing far too little as an industry to build beef demand. Supplies become less relevant in times with growing demand, and all-consuming in times of falling demand. Supplies are economic drivers primarily in the short term.

Do you want to know the future of the beef industry? All you really need to know is what future beef demand will be. Demand should and must be the industry’s primary focus, and nobody would argue that we’re doing enough to ensure that beef is competitive.

The obvious conclusion is that we must invest more dollars, and invest them more wisely, if we’re to enjoy sustainable success in the future. That seems to make the case, as many in the industry are, that it’s time to raise the checkoff assessment. Declining numbers and declining purchasing power are shrinking the impact of the checkoff almost on a daily basis.

The OIG report proves that producers’ money is being spent according to the act and order and being overseen tremendously well. The OIG report didn’t address the fundamental problem with the checkoff, which is that it’s severely limited on what aspects of the demand equation it can address. Governance and administration has proven itself to reflect the very worst side of political gamesmanship, where sides elect to fight their battles using the checkoff as a tool because of the potential to manipulate the system.

Many industry leaders believe that the checkoff has avoided that and worked perfectly since its inception, and that the last several years of political chicanery were an anomaly we likely won’t see again. The more cynical of us recognize the checkoff has traditionally risen above the political gamesmanship based on the strength and commitment of the volunteer leaders. However, we also recognize that the political gamesmanship occurred despite the fundamental structure that underpins the checkoff. The utter failure to address and fix the nomination process makes it clear that the checkoff will always have the potential to take its eye off the prize of building beef demand and be a tool to try to shape policy.

Nobody who has looked at the history of the checkoff has any concern about whether the dollars will be spent appropriately or toward building beef demand. Yet, many remain concerned that the governance structure that allowed the problems to occur hasn’t been addressed. Thus, there’s little impetus to increase funding when it could once again be hijacked by those with a political ax to grind.

I’m convinced the industry’s leaders are 100% correct in seeing the necessity to increase the amount of dollars this industry invests in building beef demand. They’re also correct that the checkoff and the structures created to build beef demand have far exceeded anyone’s expectations.

The question seems to be – what is the best way to move forward and increase our investment in building beef demand; it’s not whether our investment should be increased. Is the checkoff the correct vehicle? Do we need to address the limitations of the checkoff, or do we allow the checkoff to continue as it always have and develop a new entity that will be better able to focus on building beef demand?

With the accusations and innuendos finally put to rest, it’s probably time for the industry to have this debate. It’s likely to be the most important decision that the industry will make.